How we avoid discount demands?

September 2011

"My company has so many special discounts on our price list that almost nobody pays list price. I'd like to simplify our pricing structure by eliminating the discounts and charging everyone a standard lower price. But one of my partners says buyers will just use that new standard price to push us even lower. How can we avoid this?"

Mike: Cleaning up your price list is a great idea, but your partner raises a good point: Current customers will get very cranky if your new standard prices are higher than the deals they've negotiated in the past. You'll probably have to honor their existing prices and only apply the standard rates to new customers. And don't try to eliminate all discounts. It's perfectly reasonable to offer lower prices to volume buyers and perhaps to others who don't require much service and support.

The tricky part will be retraining your sales people, who almost certainly believe that the quickest way to close a deal is to cut prices. You'll probably have to tweak their incentive plan to discourage discounting, and you should also come up with a few low-cost giveaways--for instance, extended payment terms--that your sales force can use in place of cash discounts.

How can I meet customers?

November 2010

"How can I get to meet real customers? I'm an outside director, and I always feel inadequate when there's a board discussion about what our customers (supposedly) think."

Mike: You can learn a lot by attending your company's user group meetings or hanging out at a trade show booth. Another option is to tag along on a few sales calls, preferably to visit long-time customers who feel comfortable talking about problem areas that aren't getting enough attention. (If the sales reps don't want you on these calls, that's probably a sign that some of their accounts are ready to jump ship.)

Another idea is to have your CEO invite two or three major customers to present their top "wish list" recommendations to your whole board. You'll learn what they consider important, and your customers may gain new insights, too.

How can I grow my aftermarket sales?

November 2009

"Our sales reps love to sell big-ticket systems, but they have zero interest in pushing lower-priced add-ons. Since this is where we earn our best margins, I'd love to create an incentive plan that would make this line of business grow. Ideas?"

Mike: You have several options. One solution is simply to increase the commission on the add-ons (and perhaps lower the percentage for big-ticket deals). Or you could begin to pay commissions based on margins rather than gross revenues. Either way, selling add-ons could become somewhat more attractive to your sales reps.

However, neither of these approaches will work if your sales reps feel that small transactions involve too much hassle and paperwork--which is often the real problem.

You need to sit down with your sales team and discuss how you've structured their incentive plan. You have a real balancing act here: Your reps probably feel they're getting paid a reasonable amount of money for pushing big-ticket sales, so they won't be happy to do more work for no extra pay.